RCED-84-81 Bus Rehabilitation Issues Need Attention

I J23%23c!j ” BYTHE US GENERi ACCOUNTING OFFICE Report To The Honorable Elizabeth H. Dole The Secretary Of Transportation Bus Rehabilitation Issues Need Attention The Department of Transportation’s Urban MassTransportatIon AdmInIstratIon (UMTA) provides funds both to purchase new buses and rehabilitate old buses Recently, UMTA recognized the need to study the costs and benefits of rehabllltatlng buses GAO believes that UMTA’s planned study design needs several changes that would make the study more useful In developrng UMTA’s bus rehabllltatton policy UMTA’s funding formula favors new bus purchases Until UMTA’s cost-benefit study IS completed, GAO recomends that UMTA bmake ItsrehablIrtatlonfundIngformula Iden- tical to the formula for new bus purchases so that UMTA’s funding does not unduly influence transit authority’s declslon to buy new buses or rehabilitate existing buses The Department agreed to make the new and rehabilitated buses’ fundlng formulas Identical and address some of GAO’s concerns with Its cost-benefit study 123880 GAO/RCED-84-81 APRIL 9, 1984 Request for copies of GAO reports should be sent to: I U.S. General Accounting Office Document Handling and Information Services Facility P.O. Box 6015 Garthersburg, Md. 20760 Telephone (202) 275-6241 The first five copies of individual reports are free of charge. Additional copies of bound audit reports are $3.25 each. Additional copies of unbound report (i.e., letter reports) and most other publications are $1.00 each. There will be a 25% dtscount on all orders for 100 or more copies mailed to a smgle address. Sales orders must be prepard on a cash, check, or money order basis. Check should be made out to the “Superintendent of Documents”. UNITED STATES GENERAL ACCOUNTING OFFICE WASHINGTON, D.C. 20548 RESOURCES, COMMUNITY, AND ECONOMIC DEVELOPMENT DIVISION B-207418 The Honorable Elizabeth H. Dole The Secretary of Transportation Dear Madam Secretary: This report discusses transit bus rehabilitation issues which need attention. The report contains recommendations to you on page 11. As you know, 31 U.S.C. 5720 requires the head of a federal agency to submit a written statement on actions taken on our recommendations to the Senate Committee on Governmental Affairs and the House Committee on Government Operations not later than 60 days after the date of the report and to the House and Senate Committees on Appropriations with the agency's first request for appropriations made more than 60 days after the date of the report. In addition to the committees,mentioned above, we are sending copies of this report to the House Committee on Public Works and Transportation and the Senate Committee on Banking, Housing and Urban Affairs. Copies are also being sent to your Assistant Secretary for Administration, and the Administrator, Urban Mass Transportation Administration. Director ! GENERAL ACCOUNTING OFFICE BUS REHABILITATION REPORT TO THE ISSUES NEED ATTENTION SECRETARY OF TRANSPORTATION ------DIGEST Rehabilitating older buses, rather than pur- chasing new ones, *is a means for local transit authorities to extend the life of old, worn- out vehicles. Rehabilitation includes cosmetic, electrical, mechanical, and/or structural improvements and can cost anywhere from about $30,000 to $80,000, depending on the degree necessary. A new bus costs about $150,000. (See p. 1.) Because of increased bus ridership in the late 1970's, some transit authorities began to rehabilitate old buses rather than buy new ones. In 1979, the Department of Transporta- tion's urban Mass Transportation Administra- tion (UMTA) began providing funds to transit authorities for bus rehabilitation projects. Prior to 1979, UMTA made grants only for the purchase of new buses. In 1979, UMTA devel- oped interim guidelines, established a funding formula, and began to grant funds for rehabilitation projects because (1) it could not fund the increase in new bus purchases requested by transit authorities and (2) it believed that bus rehabilitation offered a cost-effective alternative to bus purchases. (See p. 4.) Since 1979, UMTA has spent about $70 million to help transit authorities rehabilitate about 1,900 buses and about $1.8 billion to help them purchase about 15,080 new buses. ( See P* 2.1 Although the initial cost to rehabilitate a bus is less than the cost to buy a new one, transit authorities have selected bus rehabilitation for only about 11 percent of the buses funded by UMTA since 1979. Recognizing that information on the costs and benefits of rehabilitation is limited, UMTA plans to gather such data during fiscal year 1984. The data will be used to (1) determine whether rehabilitation is a cost-beneficial alternative to new bus purchases and (2) establish a final policy on bus rehabilitation. (See p. 9.) Tear She4 i GAO,'RCED-84-81 APRIL 9, 1984 GAO reviewed UMTAIs actions to develop a rehabilitation policy because of the large amount of federal funds involved in bus purchases and the difference in costs of new and rehabilitated buses. (See p. 2.) UMTA NERDS TO ClkzARGEFUNDING . FORMULA FOR RRW&ETLITATION PROJECTS UHTA'S current funding policy favors new bus purchases. For example, UMTA will grant $120,000 (80 percent) for a new bus costing $150,000; the transit authority's share is $30,0010 (20 percent). On the other hand, for example, UMTA will grant $48,000 for a rehabilitated bmus costing $80,000, whose life has been extended 8 years; the authority's share is $32,000. In cases like this, the transit authority might choose a new bus, and UMTA would ble spending thousands more per vehicle. (See pp* 4 to 6.) Since 1979, UHTA has been concerned about the long-term impact of bus rehabilitation, such as its costs and benefits and its impact on new bus manufacturers. GAO believes that UMTA should make its funding formula for bus rehabilitation identical to its formula for new buses until its data collection and study are completed, so that its funding does not influence transit authorities' decisions to rehabilitate or buy new buses. (See pp. 4 and 11.) THE COSTS AND BENEFITS OR BUS REHABILITATION In 1979, UMTA identified the need to study rehabilitation's costs and benefits and its impact on the bus industry. During fiscal year f9841: UWTA plans to collect up to 6 months of operation and maintenance data from six transit authorities on performance before and after rehabilitation. UMTA plans to use the results of this effort to establish UMTA's policy. Rowever, the data collection as planned does not include vital elements: --It will not include data on new bus performance so that UMTA can compare rehabilitation with new bus performance. --It will not include a statistically valid sample of transit authorities. ii --It will not cover a long enough time period to accurately estimate operation and maintenance cost increases over the useful life of the bus. GAO believes thes@ elements are needed for the study to have nationwide applicability. (See pp. 9 to II.) (I GAO attempted to define the costs and benefits but could not because (1) the transit authorities GAO visited have noIt kept extensive performance or maintenance records by individual bus or bus model and (2) most rehabilitated buses have not reached the end of their estimated extended useful life. (See p. 7.) At some of those transit authorities GAO visited, information was available on the operation and maintenance costs of rehabilitated and new buses. While the data were in- conclusive because the rehabilitated and new buses had not reached the end of their useful lives, the data indicated that rehabilitated buses' operation and maintenance costs were similar to those of new buses.‘ In addition, the authorities also told GAO that, on the basis of operating performance to date, the rehabilitated buses could last at least as long as their estimated useful life. Although no final judgment could be made, GAO's analy- sis of the data shows the potential for bus rehabilitation to be a cost-effective alternative to new buses. (See pp. 7 and 8.) RECOMMENDATIONSTO TBE SECRETARY OF TRANSPORTATION GAO recommends that the Secretary direct the Administrator, urban Mass Transportation Administration, to: --Make the funding formula for bus rehabilitation identical to' that for new bus purchases until the results of its cost-benefit study are known. --Revise UMTA1s proposed cost-benefit study of rehabilitation to include a comparison of the performance and costs of new as well as rehabilitated buses, a sufficient sample size, and an adequate time frame for data collection which would allow for recognizing changes in new and rehabilitated buses' operation and maintenance costs. (See p. II.) iii AGENCY COMMENTS The Department agreed with GAO to make the funding formulas identical. The Department added that it is developing a plan for a cost-benefit study which will address the data to be collected and the time frame for its collection. (See p. 11.) OTHER BUS REHABILITATION AND PURCHASE CONCERNS In addition to identifying the costs and benefits of bus rehabilitation and new bus purchases, UMTA indicated in 1979 that it needed more information about bus rehabilitation before finalizing its policy. The information includes rehabilitation's impact on the industry, transit authorities' capability to rehabilitate buses, the effects of climate on rehabilitated buses' performance, and rehabilitation's effects on ridership. (See p. 13.) Impact on industry UMTA is concerned with bus rehabilitation's impact on the new bus industry because it believes that increases in bus rehabilitation will cause decreases in new bus orders. HOW- ever, any changes in UMTA's policy will also affect the rehabilitation industry.

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